Hiding Money Away Not Getting Easier.

fromThe Vancouver Post

It is not hard to hide money where no one — creditors, former spouses or tax collectors — can find it. Writing manuals on how to do it is a cottage industry all of its own.
But the wisdom of squirrelling money away in distant places and making it hard to reap one’s profits and dividends is questionable. Worse, if you don’t tell executors where the money is, it may be lost forever. And some banks in so-called havens are flyby-night operations. They are happy to take money on deposit but reluctant to give it back.
There is no need to troll for hideaway banks in places that keep secrets.
“If you just want to hide money to avoid creditors, you can use a safe deposit box or your mattress,” says Gena Katz, executive director at Ernst & Young in Toronto.
It’s harder to hide money intended to generate returns, she notes. Governments have been more vigilant in creating anti-tax legislation. Rules on use of foreign trusts and captive foreign entities have been tightened.
“The days of hiding money are long gone,” says Paul Lebreux, a lawyer who heads Toronto’s Global Tax Law Professional Corporation. “Now the better way is to choose to live in a country such as Barbados that does not tax foreign-source income.”Tax avoiders can still move their money or themselves offshore or create a legitimate business that operates in a haven country. “You can move your head office to a foreign country and operate a legitimate business there,” Mr. Lebreux says. If you want to operate within the confines of the rules, then it is better to pay your taxes and be honest.
Though it is simpler to make use of tax preferences and credits within Canada’s tax system, tax havens continue to beckon to those who think themselves overtaxed. But the traditional ones have tightened their rules. The United States has curbed Switzerland’s preference for bank secrecy. Rogue employees have given certain client names to the U.S. Internal Revenue Service. Canada is seeking similar information.
Liechtenstein, a feudal principality sandwiched between Switzerland and Austria, has also fessed up. As well, Andorra, famed as a haven for discreet banking and artful customs clearing, is ending its rule of silence.
Caribbean havens, including the Turks and Caicos and the Caymans, are also moving toward co-operation with various tax authorities. A few island republics that used to sell banking licences for the price of a quickie vacation under the palms are also moving toward compliance.
Panama remains a holdout. It has treaties that require it to share banking and tax information, but tax evasion is not a crime per se in Panama.
Rather than seek to avoid all taxes, one can instead choose a jurisdiction of moderate taxation. The world standard of high taxation is Europe. Tax rates in the Netherlands, for example, rise to 52% of income.
In the United Arab Emirates, by contrast, income tax rates are zero. There is a levy of 5% for social services. There is a large expatriate community providing investment service to the local economy.
Should one hasten to the Middle East or to a Central American republic to reduce taxes?
Information assembled by the Organization for Economic Co-operation and Development shows Canada’s tax rates average 31.6% for a single person and 21.5% for person who is married and has two children. These rates are below average on the scale of taxes in countries that are members of the OECD.
Canada’s taxes are far less than the 55.4% rate on a single person in Belgium, but higher than the average 29.1% rate on single incomes in the United States.
Anyone contemplating use of tax havens to hide money should include the cost of being able to return to Canada if one is charged with tax evasion. Lawyer bills could exceed the amount of taxes due. From that perspective, it pays to stay honest.
Of course, diehards can also move to our own internal haven, Alberta, which has a top 39% income tax rate compared to 46.4% in Ontario. In the West, the locals are friendly and speak English and the tax system holds few surprises.